The traditional business structure incorporates various departments within an organization – production, advertising, marketing, sales, accounting, IT, HR, etc. Each department is led by the department manager who reports to the business owner, president, or CEO. Responsibilities are split up so that every individual within the company has a clear understanding of what they do. However, this structure is not designed for every type of company. Some businesses don’t have the resources and manpower to work within such constraints, so they decide to outsource certain parts of the business.
Outsourcing finance and accounting is the area that many businesses decide to outsource due to the cost of hiring and retaining an accountant and the complexity of the work. For example, a finance department needs at least 5-6 employees, each with a different role. Depending on the size of your business, you may need to employ a full in-house finance and accounting department with roles such as bookkeeper, staff accountant, accounting manager, controller, and CFO (Chief Financial Officer). Considering the cost of building an entire department – salaries, overhead, cost of benefits, IT, PTO, and overtime – it’s easy to see how these costs can easily add up.
As a business owner, it’s essential to have good financial and accounting systems in place so you can focus on achieving business growth. A major benefit of outsourcing accounting and finance functions is the reduction of business costs by offering cost-effective services.
The Real Cost of In-House Finance and Accounting
A lot of your staff’s valuable time could be going to in-house accounting, meaning that the real cost of the function kept in-house could actually be greater than you thought. The time spent on your accounting and bookkeeping is also time could be spent as billable client hours or on building customer relationships. The cost of keeping the function in-house is not always financial because it can come at a great expense to the success of your business.
Some of the biggest issues that business owners and CEOs deal with when it comes to maintaining their own books include:
- Staying on top of paperwork and filing
- Miscalculations and errors
- Changing compliance and regulations issues
- Managing payroll
- Preparing for and submitting taxes
How Outsourced Finance and Accounting Can Save You Money
In most cases, an outsourced financial solution costs much less than what you would pay for doing the same job in-house. First of all, building and managing an in-house finance and accounting department involves the costs of finding, hiring, training, and retaining finance talent. Second, there’s the opportunity cost, which includes all the potential gains that you miss when you focus on the needs that don’t directly generate revenue or are outside your expertise. Just consider what you could accomplish in the time it takes to collect and analyze financial information, put together a financial report, or create invoices.
Outsourced financial professionals using a Finance as a Service (FaaS) approach have the expertise and are equipped with technology that allows them to do the same job faster and with fewer errors, minimizing penalties and missed deadlines, while delivering greater value to your business. Most of today’s accounting service providers are qualified in modern automation tools.
A finance and accounting outsourcing company with a Finance as a Service (FaaS) approach can help you save through:
- Managing payroll
- Monthly reconciling of your books with your business credit card accounts and bank statement
- Maintaining comprehensive financial data that helps avoid various fines
- Tracking expenses correctly to help you take advantage of tax deductions
- Tax-ready books save time and cost for your accountant or CPA
- Cash flow forecasting
- Budget creation and management
- Financial support and problem solving
- Increasing financial visibility across all departments
Outsourcing provides you with access to the latest cloud-based technologies and tools that will help you manage payments more effectively and get paid faster. An experienced finance and accounting outsourcing company will be able to provide advanced technology for less than the cost of your company’s old technology. With a few clicks of a mouse, you can see a real-time, up-to-date accounting analysis of your cash flow.
Comparing In-House vs. Outsourced Accounting
Having an in-house finance and accounting department does come with some benefits, such as having total control of how the books are being managed. While it is important to know what’s going on in your business finances, handing the responsibilities over to an expert is one of the best things you can do. Otherwise, serious issues may arise, and some of them could be irreversible.
Most common issues that businesses with in-house finance and accounting face are:
- The Cost Factor
Businesses usually spend 2-5% of their revenues on hiring and adequately training and staffing their internal accounting departments. If you look at the numbers, you will see that it is more expensive to bring a full-time employee onto your payroll. Besides the salary you need to pay, there are various overhead expenses that you should consider – paid time off, insurance coverage, office space and equipment, holiday pay, ongoing training, etc. When you compare the costs with the price of hiring an outsourced F&A team, you will see that it’s more affordable to go with the outsourced option. Some outsourcing companies offer a flat rate (all-in-one monthly fee structure) while others may charge for services hourly.
- Hiring and Training
When it’s time to hire a new employee, how much time and money is spent on the recruiting process? Going through the entire process of posting the job opening, interviewing candidates, onboarding them, and training them on procedures and systems can be a burden. But when it comes to hiring an outsourced team of professionals, you are hiring a team that already has proven systems in place, so your business doesn’t have to worry about ongoing training or onboarding.
Suppose your accountant or an important member of your accounting team leaves the company without prior notice. In that case, you will have to rush to find a replacement and spend time and energy on making them familiar with your processes and accounts. With outsourcing, one employee can easily be replaced with another one from their pool of finance professionals.
- Work Quality
Finance and accounting involve complex yet repetitive tasks, and the people responsible for them must stay fresh with industry experience, attention to detail, and mathematical skills. An outsourced accounting team comes with a vast amount of knowledge and skills (compared to having an in-house accountant). On the other hand, your in-house accountant’s mistakes might go unnoticed in the office and can be costly.
Outsourcing companies typically have a team of supervisors that evaluate their accountant’s work, which leaves less room for errors. Also, many of them rely on technology and automation to further reduce the chance of human error and be able to deliver accurate reports consistently. Your on-hand financial experts will have up-to-date and detailed knowledge of accounting principles, transactional processes, payroll processing methods, and basically anything that could lead to inaccurate filings and reporting.
You may think that you cannot afford to outsource your accounting, but when you realize that the cost of cleaning up financial mistakes could be far more expensive, outsourcing starts making sense.
- No Wasted Work Hours
It doesn’t always happen that in-house employees work optimally throughout the day, which means that you’re paying someone even when they are not productive.
As for Finance as a Service, you can expect to pay a variable and predictable pricing model that goes up or down as your business grows in complexity. You only pay them only for what you need. For example, you may choose a monthly plan that includes a few services (e.g., back-office transactional processing and statutory reporting), and if you need additional services, you can pay for them when needed. This way, outsourcing provides significant cost savings.
- Minimized Risk of Theft and Fraud
If you want to minimize the risk of theft and fraud, it must be a team effort. If there are only one or two people in the company left to oversee all things financial, the risk of undetected theft is increased. One of the best ways to avoid fraud is to have a proper internal controls system to ensure that the flow of information into your business’ accounting system is timely, accurate, and correctly classified. With proactive checks and balances in place, it is easier to detect red flags and reduce the risk of theft. With an outsourced finance function, you will have an external team overseeing your company’s finances, helping you detect any anomalies in the early stages.
As you can see, all these benefits of outsourced accounting and finance functions can save your company lots of time and money. Today, many businesses are transitioning to outsourced finance and accounting services as a more viable, efficient, and cost-effective alternative to an in-house F&A department. The cost of outsourcing this function helps remove the burden of hiring, onboarding, and training staff and is easier to budget. It’s one of the primary reasons to outsource accounting services.
Consero Global can help alleviate much of the stress by relieving you of manual and tedious accounting tasks. As one of the world’s leading FaaS service providers, Consero brings extensive accounting and business advisory resources to our clients. Freeing CFOs, senior management, and other personnel from the drudgery of mundane work and letting them focus on core business tasks will save money, but it also increases productivity and morale. Outsourcing your company’s finance and accounting function to a FaaS (Finance-as-a-Service) is cost-effective, and it gives you access to advanced technology and top talent, which helps you stay compliant, competitive, and on the path towards growth.
Reach out to Consero and request a free demo today!